Tilray (TLRY) Q1 2026 Earnings Call Transcript

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Date

Thursday, October 9, 2025 at 8:30 a.m. ET

Call participants

Chairman and Chief Executive Officer — Irwin Simon

Chief Financial Officer — Carl Merton

President, Tilray Canada — Blair MacNeil

Chief Digital Officer — Lloyd Breath

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Risks

Carl Merton stated, "Gross margin was 27% as compared to 30% last year. This decline was driven by lower margins in our beverage and cannabis businesses."

Merton also noted, cannabis gross margin was 36%, down from 40% in the prior year as a result of a higher mix of sales in lower margin categories such as infused pre-rolls and vapes.

Merton said, "Beverage gross margin was 38% compared to 41% last year. The decrease in gross margin is due to the inclusion of craft acquisition sales, which have generally been lower margin."

Takeaways

Net revenue -- $210 million in net revenue, a 5% year-over-year increase and a Q1 record driven by double-digit growth in Canadian adult-use and international cannabis sales.

Net income -- $1.5 million or 0¢ per share, compared to a net loss of $34.7 million or negative 4¢ per share in the prior year period.

Gross margin -- 27% versus 30% in fiscal Q1 2025, primarily due to lower margins in the beverage and cannabis segments.

Adjusted EBITDA -- $10.2 million, versus $9.3 million in fiscal Q1 2025, reaffirming adjusted EBITDA guidance of $62 million–$72 million for fiscal 2026.

Cannabis revenue -- $64.5 million, up 5% year-over-year, with 12% growth in adult-use gross revenue and 10% international growth, offset by declines in wholesale and higher excise taxes.

Canadian cannabis revenue -- $51 million, up 4% year-over-year; market share gap to leading licensed producer narrowed by 53 basis points, number one position achieved in several product categories.

International cannabis revenue -- $13.4 million, up 10% year-over-year, despite permit delays in Portugal; management aims to triple the medical cannabis distribution footprint in Germany in fiscal 2026.

Distribution revenue -- $74 million, up 9% year-over-year, fueled by a stronger euro and expanded reach through CC Pharma’s access to over 13,000 German drugstores.

Beverage revenue -- $55.7 million due to ongoing SKU rationalization under Project 420.

Wellness revenue -- $15.2 million, a 3% year-over-year increase compared to fiscal Q1 2025, driven by innovation in energy and nutrition product launches at key retailers.

Cash position -- $265 million in cash, plus $1 million in digital assets, following a $22.5 million equity raise under the ATM program and $5 million convertible note exchange.

Debt reduction -- Outstanding debt reduced by $7.7 million, ending with a net debt position of $3.9 million and a net debt to adjusted EBITDA ratio of 0.07 times.

Operating cash flow -- Cash flow used in operations improved to negative $1.3 million, nearly a $35 million positive change in cash flow used in operations from last year’s negative $35.3 million.

Project 420 savings -- Through Project 420, $25 million in annual savings have been realized, moving closer to the $33 million target.

Segment revenue mix -- Cannabis 31%, Beverage 27%, Wellness 7%, and Distribution 35% of net revenue, showing a shift from 28% beverage and 34% distribution contribution in fiscal Q4 2025.

Digital asset strategy -- Lloyd Breath confirmed the company’s investment in Bitcoin, with plans to enable Bitcoin payments for products later in 2025, and assessing use of Ethereum and Solana.

Summary

Tilray (NASDAQ:TLRY) delivered its highest-ever Q1 net revenue of $210 million and returned to net profitability, aided by disciplined cost management, segment diversification, and a robust balance sheet. Gross margin contraction was explicitly attributed to lower segment-level margins, with strategic actions underway to improve future profitability. Management outlined detailed progress on international expansion, regulatory engagement, and innovation across cannabis, beverage, and wellness, highlighting the scalability and integration potential of recent investments.

CEO Irwin Simon highlighted the company’s return to full Nasdaq compliance and active share trading, stating, "in the months of August and September, Tilray traded well over 1 billion shares each month."

Progress in resolving Portuguese permit delays was reported, with management noting increased recent approvals, which may catalyze deferred European cannabis revenue in the coming quarters.

Simon confirmed the European subsidiary FL Group received Italy’s first license for medical cannabis flower distribution and has partnered with Molteni to expand patient access and education.

The company’s aggressive SKU rationalization and facility consolidation in the beverage segment, including the closure of three facilities, reflects an ongoing drive to enhance efficiency and margins.

Simon described new product launches and expanded retailer partnerships, including the introduction of 10-milligram Delta-9 THC beverage formats and co-branded beer with athletics and consumer brands.

Management reaffirmed intention to participate in potential U.S. medical cannabis rescheduling, emphasizing readiness to leverage current infrastructure or pursue acquisitions if opportunities emerge.

Investment in Bitcoin and plans to accept cryptocurrency payments align with evolving consumer payment preferences, signaling an adaptive digital strategy beyond cannabis and beverages.

Industry glossary

Project 420: Tilray’s beverage segment integration and cost-reduction project focused on SKU rationalization, operational consolidation, and efficiency gains.

CC Pharma: Tilray’s German pharmaceutical distribution subsidiary, enabling access to over 13,000 drugstores and integration with medical cannabis supply chains in Europe.

SKU rationalization: Deliberate reduction of product lines to optimize inventory, streamline operations, and improve profitability, particularly cited in the beverage segment.

ATM program: At-the-market offering program allowing the company to raise equity capital opportunistically in public markets.

Full Conference Call Transcript

Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary, followed by Carl Merton, Chief Financial Officer, who will review our financial results for 2026. And now, I would like to turn the call over to Tilray Brands, Inc.'s Chairman and CEO, Irwin Simon.

Irwin Simon: Thank you, Berrin, and good morning, everyone, and thank you for being here for our Q1 results. 2026 was a testament to the significant momentum Tilray Brands, Inc. has built across our businesses over the years. I am proud to report that our strategic focus is continuing to strengthen our profitability, our balance sheet, and leveraging our global platform to drive innovation in cannabis, beverage, and wellness, and continue to deliver solid results for our shareholders. I want to extend my sincere gratitude to our shareholders for their ongoing support and belief in Tilray Brands, Inc.'s vision. It is encouraging to see our stock regain strength this quarter and return to full Nasdaq compliance.

Notably, in the months of August and September, Tilray Brands, Inc. traded well over 1 billion shares each month, highlighting the tremendous interest in our company. Not a lot of companies have a billion shares trading on a monthly basis. We sincerely thank our shareholders for their continued confidence in us and their commitment to investing in our company. Your belief in our long-term vision is what drives us forward. Now go out there and buy some of our products. Notably, during the quarter, we achieved net income of $1.5 million and earnings per share of zero, highlighting our commitment to sustainable growth and operational efficiency.

We achieved revenue growth across all our business segments with the exception of the beverage segment, which remained flat because of deliberate decisions to optimize our craft beer SKU portfolio under Project 420. Overall, total revenue increased by 5% year over year to a Q1 record net revenue of $210 million, fueled by double-digit growth in our Canadian adult-use and our international cannabis business, which delivered 12% and 10% growth, respectively. We also continue to strengthen our balance sheet by reducing our outstanding debt by $7.7 million this quarter, bringing our net debt to EBITDA ratio to 0.7 times cash due and our cash equivalent to $265 million.

Our results are underpinned by our deep understanding of product innovation and evolving consumer preferences. This expertise allows us to shape innovative offerings and not only meet current demand but anticipate future needs, keeping Tilray Brands, Inc. at the forefront of the cannabis, beverage, and wellness markets. Today, Tilray Brands, Inc. owns and operates more than 40 unique brands in over 20 countries, and we are the predominant global cannabis leader trusted by patients, medical professionals, and governments in over 20 countries and the number one Canadian cannabis producer by revenue.

The fourth largest craft beer producer in the United States and a market leader in branded hemp products across North America, with our portfolio of high-protein hemp snacks and better-for-you products holding nearly a 60% market share and now a leader in the new exciting hemp-derived Delta-9 THC beverages across the US. We have built a diversified global platform that is a leader in every industry in which we compete. Let me briefly review each business. Our cannabis business, as I said, grew 5% year over year to $65 million.

Globally, the cannabis industry continues to evolve, and Tilray Brands, Inc. has the cultivation and manufacturing agility at the right cost to compete and lead in any commercial markets around the world. Recent developments in the US have strengthened our optimism around the rescheduling of medical cannabis, as we have seen in other countries around the world. We believe rescheduling would enhance patient access, improve the quality of patient care, promote scientific research, and support a responsible regulatory framework.

The medical cannabis industry in the US is currently estimated to be at least a $10 billion market, which would create a potential opportunity for Tilray Brands, Inc. to capture at least a 3% to 5% market share, representing a significant $300 million to $500 million business opportunity. We have identified multiple pathways to participate in the US medical cannabis industry, positioning ourselves to take advantage of this substantial growth potential when it happens. In Q1, our Canadian cannabis business delivered strong results. Tilray Brands, Inc. reinforced its position as Canada's largest legal cannabis company by revenue, with Q1 revenue up 4% year over year to $51 million. In the adult-use channel, Tilray Brands, Inc. was a top-five licensed producer.

We grew market share, closing the gap to the number one LP in market share by 53 basis points. We held the number one position in key categories such as pre-rolls, beverages, oils, chocolate edibles, and by the end of the quarter, we also reached the number one spot in flower while maintaining our top 10 positions across all categories. Congratulations to Blair MacNeil and his team. We believe our extensive scale represents a significant competitive advantage within the Canadian market, where we manage approximately 5 million square feet of cultivation space and currently maintain 210 metric tons of cannabis in production, with additional capacity readily available. This positions us to effectively meet future demand.

Furthermore, Tilray Brands, Inc. is well-prepared to supply both European and US markets as regulatory frameworks develop in these markets and continue to expand. In Canada, we also foresee substantial potential as regulatory reforms may lead to transformative developments such as expanding cannabis in healthcare, unlocking new opportunities through proposed cannabis health products and broader insurance coverage, making medical cannabis more accessible to patients. On-premise consumption for THC beverages, which I believe is big, a rollout of on-site consumption to drive responsible use and create a vibrant experimental cannabis beverage market.

And, of course, regulatory modernization, which we have been talking about, updating the outdated policies that restrict competitiveness and paving the way for innovation and growth in the Canadian cannabis industry. Turning to our international business, our international cannabis revenue grew 10% year over year to $13.4 million. This is with not being able to obtain permits in Portugal to allow us to ship around the rest of the countries. We remain uniquely positioned to gain market share as global consumer preferences and regulations evolve. In Germany, we continue to expand our commercial medical cannabis portfolio and are actively leveraging our Tilray Medical and CC Pharma distribution network across pharmacies throughout the country to drive further growth.

Looking ahead, we expect to increase our medical cannabis distribution footprint by threefold in fiscal 2026, significantly enhancing our reach and impact within the German pharmaceutical market. We have that access through CC Pharma. In Italy, our Italian subsidiary FL Group received the first license from the Italian Ministry of Health to distribute medical cannabis flower for therapeutic use. We also partnered with Molteni, a leading Italian pharmaceutical company, to expand access to medical cannabis extracts and provide targeted education through their national network of medical and scientific professionals. We continue to expand our growing capabilities in both Portugal and Germany, strengthening our EU GMP certified cultivation infrastructure to meet evolving global demand.

Currently, we produce 21 metric tons of medical cannabis flower in Europe and have the capacity to significantly increase the amount as demand continues to grow. Our expanded growing operations not only support our leadership in established markets but also position us to rapidly respond to regulatory environments opening across Europe and beyond. European cannabis reform continues to progress, and we are excited to witness important developments like the European Union Canapo project and Spain's recent approval of medical cannabis. Tilray Brands, Inc. is proud to already be involved in medical cannabis research in Spain through a partnership with the University of Madrid, supporting advancements in patient care and responsible regulations across Europe. Now on to our distribution.

Our European medical distribution business, CC Pharma, continues to grow with revenue increasing 9% year over year to $74 million. The segment remains a significant driver of our European cannabis operations, and our infrastructure provides a strategic advantage that enables us to capture increased market share as both the regulatory environment and industry landscape evolve across Europe. As I said before, we have access to over 13,000 drugstores within the German market. We remain confident in our global expansion strategy with Tilray Brands, Inc. well-positioned to drive international growth and leverage emerging opportunities across cannabis, beverage, and our wellness business.

International beverage, which is a new business for us, building on our international footprint, our infrastructure, and our growth strategy, we will be accelerating the expansion of our nonalcoholic beverages portfolio across multiple international markets. We expect our brands, High Balm, Liquid Love, and Runner's High, to gain traction with consumer opportunities. We built a dedicated team focused exclusively on servicing our international customers. This specialized team will ensure that our portfolio of leading craft brands is tailored to the taste and expectations of our global consumers while also supporting our long-term growth in high-potential markets worldwide.

By leveraging our established distribution networks and brand-building expertise, we are well-positioned to capture growth opportunities in this fast-emerging category and deliver exciting new products to the international markets, and the demand for them is high. Notably, we have already secured a distribution partner in the UK for High Vol, ensuring rapid market entry and strong support for the brand in this key region. Additionally, on the beer side, we recognize the growing demand for American craft beers in the international market. To further capitalize on this momentum, we are actively exploring all opportunities to grow this business, including international manufacturing opportunities and potential acquisitions, to expand our reach and better serve our global customers.

In our US beverage business, we continue to make progress against our beer integration, optimizing our strategy and our Project 420. We see long-term potential for the beverage category based on the diversification of our offerings and the superior products we produce. We have improved operations, leveraged acquired brands, and supported positive performance. Notably, many of these brands Tilray Brands, Inc. acquired were previously in decline and are now showing promising results with healthier growth trends and improved overall performance as we move to regain sales authorizations at retail that were lost. This turnaround underscores the success of our focused strategy and our commitment to revitalizing and growing our beverage beer portfolio.

Through Project 420, we have realized $25 million in annual savings, moving closer to our goal of $33 million. We have continued to work closely with our distributors to concentrate on promoting strong brands in each of our markets. In the quarter, we experienced growth across key brands and regions. Shocktop, the company's third-largest brand, was among the fastest-growing craft brands with notable increases in both dollar sales and market share. Driven in part by the successful launch of its variety pack, it has grown to be the number eight most popular new craft beer nationally. Trends continue to improve for Shocktop, with a 30-point dollar trend improvement since Tilray Brands, Inc. acquired the brand in 2023.

In the Southeast, Shocktop excelled with a 49% jump in dollar sales, and Sweetwater Day Trip IPA stood out as one of the top new items in the region. In the Northeast, Montauk maintained its leading position in Metro New York and gained market share nationally with continued demand for its WaveChaser IPA. Breckenridge Brewery led craft share gains in Colorado, with its top Avalanche seasonal and Juice Drop brands posting double-digit growth. And last but not least, Redhook outperformed regional craft beer brands, propelled by Big Valor Imperial IPA's strong volumes and velocity gains. While 10 Barrel Pub Beer 18 packs dominated craft sales in Oregon, accounting for 5% of all craft volumes.

We also expanded our partnerships, including co-branded craft beer with the Oregon Ducks, perfect for college football season, and a new partnership with Auntie Anne's for the launch of Shocktop Twisted Pretzel Wheat Beer. You have got to try it. It is great. We are making beer fun again. These partnerships and co-branding opportunities offer significant runway for us to widen our markets. In the spirits category, which has been tough, we have introduced several world-class innovations, including Mach One, our new line of nonalcoholic spirits, and Cozzabrek in the tequila space.

We have also introduced Mountain Shop, a unique beverage blend with maitake mushrooms available in pouches, which is a unique packaging format to enhance the shot experience and capture the free spirit essence of the Rocky Mountains just in time for ski season. We also kicked off our fifth-year partnership with the Denver Broncos with a new line of spirits, including limited editions Broncos Honey Whiskey and Broncos Orange Creamsicle ready-to-drink cocktail.

In the nonalcoholic category, we are proud that our nonalcoholic beer brand, Runner's High, which we only launched in fiscal 2025, is now recognized as one of the top 15 brands in nonalcoholic beer and ranks as the fourth fastest-growing nonalcoholic beer in a hot category in the Southeast, selling across 4,500 distribution points. Following the success of our hemp-derived Delta-9 THC beverages, we have expanded the Fizzy Jane and Happy Flower product lines to include 10-milligram formats, complementing the existing 5-milligram offerings, and the consumers want these products.

The innovative Delta-9 category leverages our craft beer infrastructure and distribution networks, enabling us to deliver high-quality products to consumers across 14 states, whether they are new to the category or seeking an enhanced experience. We have established partnerships with retailers nationwide for our Delta-9 brands and now offer distribution to prominent wine and liquor outlets such as Total Wine & More, ABC Fine Wine & Spirits. In addition, in Q1, we saw further growth in regional grocery chain channels, including ShopRite, Stew Leonard's, and Winn-Dixie. We continue building on this positive trajectory as we move into Q2 and the rest of the year.

Today, our beverage business operates more than 20 brands, including 15 American craft beer brands across seven network manufacturing facilities and 16 brewpubs. We are well-diversified across craft beer, spirits, nonalcoholic, and now Delta-9, and energy drinks. We know that there is plenty of opportunity for growth in the beverage category. We have the right leadership, and we are pursuing the right growth strategy. I am tremendously excited about the future and the opportunities in the large beverage category. Last but not least, now turning to our wellness business, which is near and dear to my heart. Our wellness business had a strong quarter, growing revenues to over $15 million.

We continue to expand our wellness portfolio with many launches of new offerings, new crackers, new hemp portfolios, and other products that are available at Whole Foods and other retailers. We are now in over 17,000 retailers across the US. These offerings are also launched on Amazon and many other online retailers. I am highly confident in Tilray Brands, Inc.'s outlook for the remainder of 2026 and beyond, with regulatory environments in our industry poised for meaningful evolution. I fully expect positive change ahead, and I am certain in our ability to adapt swiftly and strategically.

Our proven approach, robust product portfolio, and exceptional team position us to seize every single opportunity, especially in wellness, where we see significant expansive opportunities, and we are committed to unlocking new possibilities through continuous innovation, portfolio expansion, and target investments, including the opportunities when strategic acquisitions happen. While we have made considerable progress, we recognize we have not yet reached our full potential, and we are far from it in the wellness space. That is the same with our cannabis business and our beverage business. There is lots of room and lots of white space for us. With that, I will now turn the call over to Carl Merton for an in-depth look at our financials. Carl?

Carl Merton: Thank you, Irwin. Please note that we present our financials in accordance with U.S. GAAP and in U.S. Dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results, and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. Now looking at our results. We are reporting record first-quarter net revenue, net income, and a significantly improved adjusted free cash flow for the period. Further, we are reaffirming our 2026 guidance for adjusted EBITDA. Net revenue for the first quarter was a record $210 million, a 5% increase year over year.

This growth was driven primarily by increased cannabis sales in both Canada and our international markets and increased revenue in our distribution segment. Cannabis revenue increased 5% year over year to $64.5 million, driven by 12% growth of adult-use gross revenue and 10% growth in international cannabis. Higher excise taxes and declines in wholesale cannabis offset those double-digit results. We see material potential for the international segment and expect continued growth once we receive several permits that are currently backlogged in a few European countries. Beverage revenue reached $55.7 million, driven by innovation and impacted by continued SKU rationalization. We advanced Project 420 and integrated acquired brands.

Although craft brands and spirits face challenges, new products contributed 2% to Q1 revenue, supporting our belief in the beverage category's long-term growth. Wellness revenue increased 3% year over year to $15.2 million because of our strategic focus on continued innovations with High Vol Energy, our natural energy drink, high-protein super seeds, and better-for-you breakfast and snacking, including the launch of two new offerings from Manitoba Harvest at Whole Foods. Distribution revenue increased 9% year over year to $74 million in the quarter, primarily as a result of the stronger euro.

From a contribution perspective, 31% of net revenue was generated by our cannabis business, 27% was generated by our beverage business, 7% was generated by our wellness business, and 35% was generated by our distribution business. This compares to contributions of approximately 31% for cannabis, 28% for beverage, 7% for wellness, and 34% for distribution in the last fiscal quarter. As our international cannabis business continues to expand, we expect to see higher contributions from our cannabis segment over the remainder of the year. Gross profit for the quarter was $57.5 million compared to $59.7 million in the prior year period. Gross margin was 27% as compared to 30% last year.

This decline was driven by lower margins in our beverage and cannabis businesses. Looking at gross margin by segment, cannabis gross margin was 36%, compared to 40% last year as a result of a higher mix of sales in lower margin categories such as infused pre-rolls and vapes, where we reentered some previously margin-prohibitive categories. We believe the decline this quarter is temporary, and the actions we have taken to drive profitability and improve margins will be effective in the long term. Beverage gross margin was 38% compared to 41% last year. The decrease in gross margin is due to the inclusion of craft acquisition sales, which have generally been lower margin.

Wellness gross margin was flat year over year at 32%. Distribution gross margin was 11% compared to 12% last year, based on changes in product mix. Net income was $1.5 million or 0¢ per share compared to a net loss of $34.7 million or negative 4¢ per share in the prior year period. Adjusted net income improved to $3.9 million or $0.00 per share compared to an adjusted net loss of $6 million or negative 1¢ per share in the prior year. Improvements in both metrics were a function of reduced SG&A costs, including amortization. Adjusted EBITDA for the quarter was $10.2 million compared to $9.3 million last year.

Cash flow used in operations improved significantly to negative $1.3 million for the quarter, from negative $35.3 million last year, representing a positive change of almost $35 million. We continue to strengthen our balance sheet this quarter in terms of debt and cash positions. During the quarter, we raised $22.5 million under our ATM program, primarily after our stock increased to over $1 per share. Further, we exchanged $5 million of our convertible notes for equity early in the quarter, as we already discussed during our last earnings call.

During the quarter, we reduced our outstanding debt by $7.7 million, bringing our net debt position down to $3.9 million and our net debt to trailing twelve months adjusted EBITDA ratio to 0.07 times, all while ending the quarter with $265 million in cash plus another $1 million in digital assets. These stronger debt and cash positions provide Tilray Brands, Inc. with greater flexibility for strategic opportunities. We intend to continue reducing our debt and further strengthen our balance sheet as the year progresses. As already discussed, our confidence in our business, our strategy, and our team has never been higher, and we are pleased to reaffirm our 2026 guidance, anticipating adjusted EBITDA between $62 million and $72 million.

We can now open the line for Q&A.

Operator: Thank you. Press 1 on your telephone keypad. A confirmation tone will sound. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Aaron Thomas Grey with Alliance Global Partners. Please proceed with your question.

Aaron Thomas Grey: Good morning, and thank you very much for the questions here today. First question for me, I just want to talk a little bit about international growth opportunities in the near term. You offered some commentary in your prepared remarks. I just want to make sure I was understanding them correctly. So first of all, just further understanding in terms of where we stand today in terms of the impacts on some of the permit delays that you have been having. And then some commentary you provided in terms of the growth specifically, I think you are referring to medical cannabis being up three times in fiscal year 2026 and talks about leveraging CC Pharma potentially.

Just want to make sure I was understanding that correctly. Were there some things that you are looking to leverage CC Pharma business that you were not, you know, historically? So just any additional commentary on that would be helpful. Thank you.

Irwin Simon: Great. So a couple of your questions. Number one, in regards to permits, we spent a lot of time with the Portuguese government. We have spent a lot of time with Portugal. We are finally seeing permits coming through. I feel good about that. The next big issue that we run into is the quota in Germany and just Germany opening up and increasing more imports into the German market. We think ultimately that will happen. But it is not business going away. It just may shift from the second quarter into the third quarter as the new quotas move into place in 2026.

So with that, I feel we have made a lot of headway into the Portuguese permit situation, and we got more permits in the last two weeks than we probably got in the last two months or so. In regards to a couple of things, the demand in Europe is there. And with that, it is the availability and the grow. And with the new team, and now we moved some of the Canadian team into international. We look to grow in our facility today, and Portugal is running about 50%. We have the opportunity to double that at 40 metric tons, and that is something we are working on.

The other thing is to really increase our growth to probably six or eight metric tons in our German facility. And also where the opportunity is in regards to bringing product EU GMP product in from the Canadian market. In regards to Germany, what I have said and what I was working through, CC Pharma, when we acquired it, it was a big part of our license, and it was something that there was an opportunity. And what we are seeing is some great expansion with CC Pharma. CC Pharma delivers to 13,000 drugstores today, and that is regular medicines.

And the good thing is we are also seeing some good price increases and some good opportunities on the CC Pharma distribution business. But more importantly, as we integrate these businesses, whether it is on the sales side and the distribution side, we see CC Pharma being vertically integrated and distributing our medical cannabis to a lot more of these drugstores in the German market, and that is a big opportunity for us.

Aaron Thomas Grey: Thanks for that, Irwin. That is helpful color there. Second question for me, just in terms of rescheduling opportunities in the US. You offered some commentary talking about seeing a number of different avenues that you guys are evaluating. Just curious. Could you provide some color there if things were to open up and cannabis was rescheduled to Schedule 3, do you feel like you already have the infrastructure within the existing business to be able to capture some of the opportunity organically, or do you feel like some things might need to be done, you know, vis-a-vis acquisition to capture on that opportunity?

I know there is a lot in flux in terms of how that could actually look in a Schedule 3 scenario, but just any commentary on that would be greatly appreciated. Thank you.

Irwin Simon: Well, listen. As I said before, we have 5 million square feet. We have today over 200 plus million metric tons of cannabis grow in Canada. We have a great Canadian medical infrastructure in Canada already servicing the Canadian market. The Canadian market is 40 million people, so we service clinics up there. We have a group with an infrastructure that sells to the Canadian market today. Talking about Europe, you know, as we look to sell and the objective is to sell close to $100 million of medical cannabis in Europe, which is all medical cannabis. And there is plenty of research that we are doing over there for anxiety, for sleep, for cancer, for epilepsy.

So taking that know-how and transferring it to the US is something that is readily available. And last but not least, if there was an opportunity to partner with a pharma company or there was an opportunity for us to buy, we would be ready and willing and able to do that as we have the balance sheet potentially, you know, as we have the balance sheet to do that. So whether it is taking our current industry, our current people, our current know-how, our current growth, our current research, our current genetics for medicine, or partnering with a pharma company, or buying something is something we are open and ready to do.

Aaron Thomas Grey: Great. Thanks for that color there, Irwin. I will jump back into the queue.

Irwin Simon: Thank you. Thank you. Our next question comes from the line of Bill Kirk with Roth Capital Partners. Please proceed with your question.

Bill Kirk: Hey. Good morning, everyone. On the balance sheet, I see the $1 million in digital assets. I guess, were those investments you made, or was it crypto that came in from customer payments? And then taking a step back on the topic, I guess, which coins, tokens, currencies do you prefer? And what are your cash allocation plans to the strategy given your cash generation and your equity issuance history?

Irwin Simon: So that is the acquisition of Bitcoin that we acquired three, four months ago. And with that, I am going to let Lloyd Breath, right, just take you through some of our strategies that we are looking at from Bitcoin today as we see relevance with our current investors, our current users, who are also, you know, Bitcoin users, and we see opportunities as I have said in previous meetings and previous releases, that we see opportunities with Bitcoin in purchasing our products and purchasing our beer products, and we see opportunities with our current investors. Lloyd?

Lloyd: Hi, everyone. Good morning. Yeah, we actually invested in Bitcoin, and we are also looking at some other assets such as Ethereum and Solana. One of the things part of our strategy that is core is enabling our websites so that we can actually accept Bitcoin. So that is going to be part of our strategy later this year. Additionally, we are looking at some investment opportunities from a marketing perspective, as well as looking at tokenizing potentially some stock.

Irwin Simon: And, you know, with that, I just want to make sure, listen. We see the opportunities. We see the synergies with our products, with our investors, and we are not becoming that crypto company out there. But we see tremendous synergies as we expand Tilray Brands, Inc. into, you know, many new markets and many opportunities from that. And we are working with a lot of partners out there and making sure we have the right people that understand crypto and how to do it.

Bill Kirk: Thank you. And going back to Germany, Europe, I guess, when you are servicing those markets, how much of the product is grown today in Portugal? How much is coming from your Broken Coast GMP facility in Canada? And how much that ends up being sold in Germany and Europe is coming from a non-GMP facility of yours in Canada? And then the bigger question, what are the risks that Germany changes the way they treat product conversion or product coming from Portugal?

Irwin Simon: So listen. Number one, the majority of our product today that is sold in Europe is coming from our facilities in Europe. Okay? And when product does come from Canada, it goes into Portugal. It then goes to an EU GMP certified facility. So everything sold there is EU GMP certified. Okay? With that, again, there are lots of possibilities. We do have a good-sized German facility that can grow cannabis. We are one of the few, if not the only, in the EU that Germany would not allow European products to be shipped into, you know, the German marketplace. So, you know, that ultimately is something we are continuously talking to the German government about.

And if they did that, there is not enough grow in the German market today to be able to supply the market. So it is something that would be very difficult if the German authorities change the market change the way products come into Germany.

Bill Kirk: Thank you for that.

Irwin Simon: Okay. Thank you.

Operator: Our next question comes from the line of Robert Moskow with TD Cowen.

Victor: Hi, good morning, guys. This is Victor on for Robert Moskow. Two questions for me, please. First, can you give us a state of the union for the Canadian adult-use market? Curious on your thoughts on market maturity and your pricing power in the context of the 10% growth you saw this quarter? How much of that maybe was like volume versus price?

Irwin Simon: So and Blair, do you Blair, you are on the line. Feel Blair MacNeil or head of our Canadian market. Blair, do you want to jump in and take that, and I can add to it?

Blair MacNeil: Yeah. Absolutely. Thanks, Irwin. Yeah. So in the quarter, we saw overall market pricing down 1.3%, and volume was up 6.5%. For us, our pricing was actually up two, and our volume was ahead of the market. So it was a really strong quarter for us both on the pricing side and on the volume side. As you saw, we were the only LP in the top five to grow share in the quarter. So very, very strong results. In terms of market maturity, what I would tell you is in the current regulatory environment, yes. You know, volume has slowed in terms of growth rates. But still very healthy growth rates in the market.

And I think what you will see is over the next few quarters is that and Irwin kind of referenced this, is that you will see the regulatory environment improve, and I think you will see growth continue to go. Overall, household penetration on cannabis in Canada is still at a very low number. So we see tremendous runway for growth in Canada within the regulatory framework.

Irwin Simon: And listen. I think and I will just jump on that for a second. The Canadian market was the first. And, you know, as we go into our sixth year, with that, again, from a regulatory standpoint, and what are we still sitting with? We are still sitting with the high excise tax. We are still sitting with lots of regulation. We have been through price compression. We have been through COVID. We have been through an illicit market. We have been through over 1,800 LPs that are out there. A lot of them have gone away. A lot of grow facilities.

And, we have gone through educating the Canadian consumer on the benefits of cannabis and the legality of cannabis without, in actuality, being able to advertise. And we have built our good supply today, Blair, which is at retail about a $250 million brand, right? And from that, that is what we have built over the last, you know, five, six years. We have over 5 million square feet of grow. We have the largest grow facility in Canada with 237 metric tons and maybe even more. So you know, the Canadian market has been a great pivotal point for us. Now what we are hoping for is on excise tax, there are some concessions.

We are hoping that Canadian provincial governments allow us to sell our drinks into other retail outlets like restaurants that need help or, you know, independent retailers or liquor stores. We are looking for changes in regards to where medical cannabis is sold, where it is sold directly in through drugstores. And that would change a lot, you know, for our Canadian market. So, we look now for some big opportunities coming to the Canadian market. And then, you know, Blair and his team have really put us in a good space there to really move beyond and a good role in regards to our products.

Victor: Got it. And then my second question is, so beverage gross margin was about 50 bps lighter than kind of we expected. Can you remind us of your plan on improving profitability in that segment? And also, where are you on that path, that Project 420 path, and what still needs to be done?

Irwin Simon: So as you saw, we have taken $25 million of cost out, and there is more to go. We have gone through, and I think, SKU rationalization, you know, $20 million of SKU rationalization, and there is more to go. We have closed three facilities so far. So come back, you know, in acquisitions, we have acquired close to 12, we have closed 12 brands. We, you know, have closed, we had 10 facilities. We have had 18 brewpubs. And, also, we have over 900 plus distributors out there.

So bringing this all together under, you know, one management, one infrastructure, and, you know, we are seeing progress, but there is a lot of wood to chop there yet to get those margins to where we need to do. And whether it is the procurement of cans, the procurement of hops, and one of the biggest things, you heard me mention, you know, in my remarks, you know, a lot of these brands, as we were buying them and decisions were made by the previous owners, we were delisted in a lot of retailers out there. So with that, you saw major declines in these businesses. And we missed the windows of getting these products in the stores.

Now these windows have opened up, and getting these products now relisted in these retailers is something that we have been doing. And that is why, you know, whether it is Shocktop, whether it is Redhook, whether it is some of our other brands, you are seeing the growth there. And that is what is going to happen, you know, to get our gross margins up here. And listen. Let us all face it. The beer category is not one of the easiest categories out there right now. And, you know, we are fighting through it both on the growth side, innovation side. I have said it from the beginning, how do I make beer fun again?

And that is something we are trying to do. Along the way, make money with it too.

Victor: Got it. Thanks, guys.

Operator: Thank you. Ladies and gentlemen, our final question comes from the line of Frederico Gomes with ATB Capital Markets. Please proceed with your question.

Frederico Gomes: Hi, morning. Thanks for taking my questions. First question, just thinking about the issues in Portugal. I am curious how do you see that in terms of managing future risks in terms of your international strategy, you know, whether you are taking steps to diversify your supply chain there and how would you go about doing that? Thanks.

Irwin Simon: So number one, you know, we got a million and a half square foot facility in Portugal. We are not picking up and moving it. Okay? I mean, over a couple $100 million are built, and it is a state-of-the-art facility. So I am in Portugal. I have got to stay there. I have got to figure out how to work within those confinements. And I must tell you, I have had some great meetings with two ministers in Portugal, at the highest levels. And they are very open. In Portugal, you know, there is a new government in Portugal, and they want business. They do not want us leaving.

They want to build upon our business there, and they have been very, very supportive of working with us. And since my meetings, with our people, we have seen lots of changes that we have been getting our permits. So I feel good. On the other hand, listen. We do have a facility in Germany, nowhere near what we have in Portugal. We do have the ability to ship from Canada, and, you know, where we would ship it directly into the UK and directly into other markets to ensure EU GMP. So we have options. But first and foremost, we are far from giving up on the Portuguese market.

Frederico Gomes: Thanks for that. And another question here. Just on Germany, could you talk about the proposed change there in legislation in terms of prescriptions and how the market works? How do you think that could impact that market? And, you know, whether you think that draft that is going there may be approved or not as is, or you expect changes to that draft in terms of timing as well, when do you think, you know, the market there could change in terms of the legislation? Thank you.

Irwin Simon: Listen. We are supportive of change. But, again, you know, I do not want to go out there and speculate until I know what the change is. Okay? And I think so far, the good news is what we are seeing is a continuous demand, and online prescription has not been one of the biggest, you know, drivers here. So if there is change, I think patients will find other ways to go out there and purchase cannabis. And, you know, it is interesting because Germany has strong independent drug chains out there. There is no, you know, CVSs. There is no Walgreens. You know, individuals are allowed to own, like, six drugstores. They are all independent.

So like I said, there are multiple stores out there. It is not online. So I see even if it did change that you cannot buy it online, there are still the retail outlets to go to out there. And I would like to see some of the changes, lots of changes that we continuously talk about that did not. And we, with our lobby groups, are out there working with the German government on what is the right thing for the patients. Because this here is important too. The difference in medical cannabis is like medicine. If you did not give patients access to get medicine, that is a problem.

If you could not get your medicine, and did not have access, a patient that is sick or dependent on it, that is an issue. So this is being sold as medicine from a medical standpoint, not from a recreational. If you do not get your cannabis from a recreational standpoint, that may not be as an issue. But you are not getting your medicine, and the government has to take that, you know, into view when they are deciding what they are going to do here.

Frederico Gomes: Thank you very much.

Irwin Simon: Great. Let me just say this here. I know a lot of have joined now. Unfortunately, not us. There was a technical problem with our provider. And those that were online did not hear my comments. Sorry about that, guys. You missed some great comments and Carl's comments. Okay? If you want to hear me again say it, you can go online and listen, and I encourage you to do that because there is some really good information that both Carl and I delivered today. And I apologize. And the carrier, they will hear from us, and, definitely disappointed. I know you heard music, so we had a lot more to say than the music.

But please, it has been recorded. It is online. And you will get every bit of it. And for some reason, there is an issue, let Berrin know, and we will make sure you get it. I am really sorry about that. In regards to the analyst questions, I think you heard most of those. You will be able to get those, the analysts that were here. You know, were able to hear Carl in our remarks. So I apologize profusely for that. With that, thank you very much for your time today. I hope some of it was not wasted by not hearing our comments, but now you will have to go online and listen to it.

It is only Q1 in 2026. You know, one of our smaller quarters. There is a lot to do. And as you can see, we have a lot of good things in place. And trust me, there have been times, like, you look at and sort of say, you know, what the heck are we doing here? When you look at your stock price, you look at different things. But this team, in over five years, really have brought a lot together here. In rebuilding a Canadian cannabis business basically from scratch. Building facilities, building brands, building products, building different strains, genetics, new innovation, and some of the new innovation that is coming out of there.

Building infrastructure and sales and marketing teams, again, going through price compression, going through COVID, going through, you know, the illicit market as one of your biggest competitors out there, and I really want to commend the Canadian team and what they have been able to do. In regards to our international cannabis business, same thing. It has come together basically with the acquisition of Tilray Brands, Inc. And it is, you know, really a business that I see tremendous opportunities. And we now are getting requests, you know, in different countries, whether India, Middle East, and places like that in regards to medical cannabis and the opportunities there.

And there are a lot of countries, and there are a lot of different, you know, countries out there that are realizing the benefits of that. And also realizing the benefits of medical cannabis versus medicines in cost of drugs and that out there today. And what the benefits will be. So I see big opportunities for us today. You know, Rajnish Ohri has joined us as now head of Europe. And is bringing the teams together. And we have done a lot with our Canadian teams to integrate these businesses to get synergies and savings to get a lot of the know-how. Because one of the things cannabis is agriculture. It is growing. It is yields.

It is the size of the flower. It is the potency. And that is something that is important out there. And this is not an industry that is it is an industry that has spread around the illicit market for many, many years, but it is not an industry that has been around from a legalized market. It is not industries that have been around from a grow, from a research and development that is all coming together. And countries are realizing the opportunities and what they are doing, you know, not allowing their citizens and patients to be able to buy these products.

The other thing they are realizing is there are tax dollars that they are missing, and if tax dollars are being sold through an illicit market. In regards to rescheduling, President Trump, with his different tweets and his different comments, I think, realizes that something has to happen here in rescheduling. Last week with his tweet or two weeks ago in regards to CBD. You know, in regards to senior citizens, and I cannot tell you how many people tell me in using CBD and THC products.

You know, in regards to pain and anxiety and that and the benefits for what we are seeing today on our Delta-9 products and being sold in limited states and the demand for it again, what Blair has seen in the Canadian market with building, you know, a 40 plus million dollar business and today just being sold within, you know, cannabis stores. And, again, at prices that are not the cheapest prices out there. So we see tremendous opportunity in the beverage business. In regards to our beverage business, it is work, you know, it is work we have got to do. And, we got into it in 2020 with the acquisition of Sweetwater.

You know, acquired Montauk, acquired other brands and the businesses from ABI. Then the business in Molson's. We got some great brands. But bringing it all together is a lot of work. Bringing the facilities together, getting the cost out, getting the margins out, getting the right facilities. And that is something that, you know, Tilray Brands, Inc. is doing and the team is doing out of Atlanta to bring all this together. And as I said before, not an easy business today with changes happening, but we will be in the beverage business, not just the beer business. And with that, there are a lot of interesting products we are working on.

In regards to our spirits business, the team is working with our distributor, RNDC, and we have really put a plan in place with RNDC to be in our major markets. Yes, the bourbon category is a tougher category today than it was, but Breckenridge bourbon is a great tasting product out there, and there is great demand in certain markets at the same time. Our vodka has great demand and our gin and some of our new products that we have come out with are really, really good products. And some of the first time are innovation. And last but not least, you hear me talk about our wellness business. What Jared and team have done on wellness.

We acquired this, it was a negative EBITDA about $56 million, and we have turned it around to today. And as somebody that has been part of the wellness category since 1992, 1993 and see the growth, it is all we talk about, the wellness, wellness, and food. In regards to, you know, the Trump administration and taking colorings out of food today, higher protein, protein, protein, protein, and some of the highest protein is in hemp foods because it is a plant that is grown. So we are in a lot of different categories. We are in a lot of unique places.

You look at our balance sheet in regards to our debt to equity, it is in a great place. We ended the quarter with $260 million of cash. So there are a lot of good things happening. But there is a lot of work to do. I really want to thank our team that really makes this happen and rolls up our sleeves. Even though there are 2,500 employees around the world here, not a lot for a lot we have got to get done. So with that, I want to thank everybody for listening. Please go back and relisten to our comments. There are a lot of good comments that came out of today.

Thank you to our shareholders for your support. And get out there and vote as we have our AGM coming up. With that, have a great Thursday, and look forward to speaking to you in the New Year with our Q2 results. Thank you.

Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

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